On Returning Capital (or not?)
Winter 2025 update: hindsight is 20/20, but we still believe we made the right call. 2024 was fucking brutal. Yet here we are, stronger and free to explore new directions on our own terms.
Context¶
After three years building burrata.xyz, we returned more than 40% of our capital to investors and shut down.
Our primary thesis never hit, and soft pivots felt forced. Letting myself go in the worst market for tech talent in decades was the hardest decision of my career—on par with the Dot-com bust days. I’m grateful for my cofounder Matt, who went through the fire with me like a brother, and for Ian’s support. I’m also thankful for our investors, who backed us as we tried to crack crypto regulations. Some offered to re-route money to a fresh entity so we could test new ideas.
In our last update, I said:
We came here with a bold vision, built a stellar team, more impressive product yet missed the mark. Returning money felt right.
A few million bucks may not change Stripe or Variant’s world, and maybe they’ll forget me (hello if you’re reading!), but this decision felt right.
This post is for fellow founders who’ve asked how we decided to shut down. There’s no universal playbook—this is just how we approached it. If you’re pre-PMF or your traction is shaky, maybe this will help contextualize your own call.
Quick legal note: If you signed a standard SAFE with tier-1-ish Bay Area investors, you’re usually not legally required to return the money. This isn’t legal advice—just a reminder that often the decision is ethical, not contractual. Of course, Twitter armchair critics will say you’re “weak” for quitting, or that VCs wrote you off anyway. I never viewed investor money as a handout: we tried something bold, it didn’t land, so we did right by them.
When to Pull the Plug¶
Below are the scenarios that often signal it’s time to shut down. You’ll have your own nuances, but these are the straightforward cases that often justify handing it back (unless investors advise otherwise):
1. Cofounder breakup¶
Investors typically bet on teams, not individuals. If your cofounder relationship implodes and you don’t have clear product-market fit, it’s often best to shut down and reset.
2. Team is together but can’t ship¶
If the team can’t get traction—either due to lack of skill, motivation, or momentum—and the roadmap keeps stalling, it’s usually time to pull the plug. A startup is like a sports team: no momentum, no game.
3. Misaligned cap table¶
If you’ve got a specialized cap table (e.g., all health-tech investors), but now want to pivot hard (say, into consumer social), it probably won’t be a match. That doesn’t mean it’s impossible. Talk to your investors; maybe they’ll roll you into a new project or pass their stake along. But if you’re stuck in a major pivot that nobody signed up for, it might be cleaner to return capital.
4. Team has lost energy¶
Getting up after a beating is tough; doing it as a team is even tougher without a coach or mission. If everyone’s enthusiasm is gone, you have two choices: push for a short break or shut down. You can’t take a three-month sabbatical in a pre-PMF startup—it kills momentum. If your team needs that much space, it’s probably better to close up shop.
For our team, we tried multiple soft pivots around crypto regulations. Nothing big stuck, and a hard pivot required a clean slate.
Timing¶
The timing of this decision matters. Waiting until you’ve burned 75% of your cash is too late—there’s little left to return. My gut says if you’re hitting 35–40% burn without solid PMF signals, that’s when you start asking the hard questions.
So …¶
Sometimes the only winning move is to stop playing a game you can’t win. If you’re here, you’re not alone. Do right by your team, your investors, and yourself. Then move on to the next chapter.
Or not …¶
If you think you still have plenty of shots on goal and your team and investors are aligned, keep playing. Plenty of successful companies took more than five years to really find their footing. The point is: don’t walk away too soon if there’s real momentum and commitment on all sides.